Summary
The Supreme Court held that the disputed additional-interest amount received by a securities broker for Indian Bank was not his income. The evidence established an agency arrangement: he held the money for procuring demand drafts for payments on the bank’s behalf and returned it accordingly. Physical receipt did not establish real accrual or ownership. Evidence proved in the related criminal proceedings could be considered without treating the criminal court’s findings as binding on the tax authorities.
Issues
- Whether the additional-interest funds held by the broker accrued to him as income.
- Whether evidence from related criminal proceedings could establish the parties’ relationship in the tax dispute.
Held
- The decisive issue was the capacity in which the broker held the money, rather than receipt alone. Irregular features of the securities transactions did not themselves prove taxable accrual of the disputed sum to him. (¶¶ 10, 11, 13)
- The agency understanding need not have been written; it could be inferred from the parties’ conduct. Bank officials’ evidence and the bank’s acknowledgement of demand drafts established that prices and use of the differential amount were directed by the bank. (¶¶ 11, 12)
- The High Court did not treat the criminal court’s findings as binding on the Revenue. It could nevertheless consider duly proved evidence from those proceedings, absent anything to the contrary, when determining the bank-broker relationship. (¶ 12)
- The broker had no ownership claim over Rs.14,73,91,000 and held it in trust under the prior understanding for payment to public-sector units on the bank’s behalf. Having handed it to the bank for that purpose, he was not taxable on that sum as his own income. (¶¶ 12, 13)
Result
Revenue’s appeal dismissed without costs; connected appeals disposed of accordingly. High Court’s exclusion of the disputed sum from the broker’s income sustained.